BLBG: Yen Falls After RBA Fuels Speculation of Coordinated Rate Cuts
By Ron Harui and Stanley White
Oct. 7 (Bloomberg) -- The yen fell from a three-year high against the euro after the Reserve Bank of Australia lowered interest rates by twice as much as economists expected, fueling speculation of coordinated action with other central banks.
The yen also declined from a six-month high versus the dollar as Australian policy makers slashed borrowing costs by a full percentage point. Asian stocks and the Australian dollar pared losses on speculation cuts in global rates will restore confidence in purchasing higher-yielding assets funded with Japan's currency.
``The yen is being sold on signs that policy makers can relieve the stress we've seen in credit markets,'' said Akio Shimizu, chief manager of foreign-exchange trading in Tokyo at Mitsubishi UFJ Trust & Banking Corp., a unit of Japan's largest publicly listed lender. ``The size of the RBA's cut is enough to suggest that central banks may coordinate their monetary easing.''
The yen traded at 140.23 per euro as of 1:39 p.m. in Tokyo from 137.50 yesterday, when it touched 135.05, the strongest since September 2005. Japan's currency was at 102.98 per dollar from 101.82. The euro was at $1.3605 from $1.3499. It touched $1.3444 yesterday, the lowest since August 2007, when the credit crisis started to gain momentum.
The Australian dollar fell 2.7 percent to 74.66 yen, paring an earlier 8.4 percent decline to 70.32 yen, the weakest since March 2003. The New Zealand dollar, also called the kiwi, fell 1.8 percent to 65.39 yen after dropping as much as 6.8 percent.
The RBA lowered its overnight cash rate target to 6 percent from 7 percent, adding to last month's quarter-point reduction. Economists surveyed by Bloomberg News expected a cut to 6.5 percent. The Bank of Japan today kept borrowing costs unchanged at 0.5 percent.
The U.K. central bank meets on Oct. 9 and finance ministers and central bankers from the Group of Seven nations gather on Oct. 10 in Washington amid the deepening credit-market crisis that has stalled bank lending.
In so-called carry trades, investors get funds in nations with low borrowing costs and buy assets where returns are higher.
To contact the reporter on this story: Ron Harui in Singapore at firstname.lastname@example.org; Stanley White in Tokyo at email@example.com